The U.S. Small Business Administration has released a form of one page that makes it easier to apply for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that comply with the latest stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in funding for small businesses seeking forgivable loans to help them deal with the financial fallout from the coronavirus outbreak. It included a requirement for the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the procedure of applying for forgiveness. It also included conditions designed to facilitate more loans from community banks, especially for minority-owned businesses that were unable to obtain loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness within 24 days of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
What Is Forgiveness Loan – First Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8- to 24 week period that follows loan disbursement:
- This is also true for compensation and employees.
- The loan proceeds can be used to cover expenses for payroll or other eligible expenses.
- Minimum 60% of funds go to the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8to 24 week duration following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
- The loan proceeds are spent on payroll costs and other expenses that are eligible and
- At least 60% of profits are used for the cost of payroll
- When and how do I apply for loan forgiveness?
Once all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the end date of the loan are eligible to receive loan payments from their PPP lender.